The Federal Reserve is widely expected to leave its benchmark interest rate unchanged on Wednesday, keeping the target range at 3.75% to 4%, according to CNBC. Markets assign less than a 10% probability to another increase at this meeting, based on the CME Group's FedWatch tool, after the central bank raised rates by a quarter point in September.
With the decision itself seen as a near certainty, attention shifts to Fed Chairman Kevin Warsh and his post-meeting news conference, where investors will look for signals about the path ahead.
Why it matters
A pause would leave borrowing costs at levels that continue to weigh on household budgets. Credit card rates have reached their highest point since late 2025, 30-year mortgage rates remain above 7%, and auto loan rates are holding near 7%, with used-car buyers often facing more, CNBC reports. Those costs compound existing affordability strain, especially for lower- and middle-income consumers.
The hold also carries a communication challenge. Inflation has moved further from the Fed's 2% target since policymakers last met, and several indicators point to additional pressure in the months ahead. Explaining a pause while prices are accelerating is the central difficulty facing the committee.
Traders, for their part, expect the Fed to resume tightening at its December meeting, according to CNBC.
Inflation data points higher
The backdrop is a run of reports showing price growth reaccelerating. September's consumer price index put annual inflation at 3.7%, lifted by energy costs, and the index is in the middle of one of its longest stretches above 2% on record. The producer price index climbed 6.3% year over year in September, its sharpest 12-month gain since 2022.
The Fed's preferred gauge, the personal consumption expenditures price index, arrives Thursday morning. Economists surveyed by CNBC expect the headline figure to rise 0.5% for September, pushing the annual rate to 3.7% from 3.4%. Core PCE is projected to gain 0.3%, lifting the yearly rate a tenth of a point to 3.1%.
Some analysts have pointed to the three-month annualized core rate as evidence that inflation is contained. It stood at 2.05% last month, close to target. But CNBC notes that the measure is highly sensitive to new data: a 0.3% core increase would push it to 2.7%, and factoring in the Cleveland Fed's October nowcast of 0.25% would lift it to 3.24%. The gauge, in other words, offers a shaky basis for policy.
Other measures tell a steadier story. The Cleveland Fed's trimmed mean has stayed between 2.6% and 2.7% for most of the year. The Dallas Fed's version sits at 2.2%, the lone indicator supporting a softer reading on inflation, though Dallas Fed President Lorie Logan has herself warned that it may strip out too much, according to CNBC.
Goldman Sachs expects inflation to ease next year as tariff, AI buildout and energy pressures fade, but flagged a risk that firms use the customary start-of-year price increases to pass on higher costs, producing a larger "January effect."
The risk of waiting
Holding steady while inflation runs hot could force the Fed into larger moves later. TD Securities told CNBC that a single poor inflation report or a cluster of strong labor market data could lead markets to price in greater odds of a half-point increase at an upcoming meeting.
Equities were cautious ahead of the announcement. The Dow Jones Industrial Average gained less than 100 points, while the S&P 500 and Nasdaq traded near flat. Treasury yields moved higher, with the 10-year note up about 3.6 basis points to 5.03% and the 2-year up 3.7 basis points to 4.774%.
One pattern worth noting: since Warsh became chairman in May, stocks have tended to slip on meeting days and rebound the following session. DataTrek Research cofounder Nicholas Colas found the S&P 500 rose at least 1% on each of the three post-meeting days of Warsh's tenure, CNBC reports.
For consumers, relief is unlikely while rates stay put. The one clear benefit is on the savings side, where high-yield accounts continue to pay considerably more than conventional bank products. CNBC notes that households can ease pressure by retiring high-interest balances, negotiating loan terms and making use of those savings yields.
Watch Thursday's PCE release and Warsh's tone for the clearest read on whether December brings another hike.
